Nov 14, 2015
Please Note: Not a buy call please. Just sharing my thought!
Hi All Value Investors,
The price spike in this 80th years old giant printer : Tien Wah Press Holding Bhd, 2 days ago triggered my interest to dig into this company. I believed many of the same like me would have noticed this spike.
I have have mistakenly assume Tien Wah is just another small time local printer. To my surprise, this company is actually indirectly owned and controlled by Japan Giant Printing company, Dai Nippon Printing Co., Ltd. http://www.dnp.co.jp/eng/ via singapore Tien Wah Press Holding Pte Ltd through Tien Wah Holdings (1990) Sdn Bhd and Singapore Pacific Investments Pte Ltd.
If i would to use RM 1: JPY 28, the annual sales of this Nippon giant is at RM 52,218,500,000.00 (RM 52.2 billion) with 39,451 employees.
If you are interested to look at the corporate profile, you may click here: http://www.dnp.co.jp/eng/corporate/pdf/dnp_brochure_eng.pdf
After browsing through the profile, it widen my scope of perception about Tien Wah.
It answers my first question: Tien Wah is definately not a small scale local printer!
Now, let see what happened:
The share price up steadily from 2011 till a dipped for the nearly 18 months from February 14 to Nov 15, and followed by a big spike!
The movement of share looks very much tally with the financial result as per below:
1. steady revenue
2. profit drop
Key Points to Note:
3. NTA of this company is actually keep going up
4. the sudden big jump in profit ( the single highest quarterly profit for the past 10 years)
My 2nd Question: What happend during no.2?
There is an one-off-expenses (rebate + redundancy expenses) totalled RM 7.9 million recognised. If i would to add back this sum into FY 2014 total profit, then the profit will be quite substantial although the "adjusted" profit still lower than previous year. But, at least not that bad till causing the share price to drop so drastically.
So, the answer to my 2nd question: I think the worst may have over and post restructuring of company should make it more efficient.
3rd Question: Current business prospect?
For FY 2014, Printing contributed about 76.5% to company segment operating profit (ex-deductable expenses) before arriving the final Profit Before Tax figure. Balance about 23.5% is trading of cigarette packaging cartons.
My interpretation: Because more than 10% of the company revenue is related to tobacco industry, i have few understanding as per below.
(1) it is easier for a non-smoker to be smokers (and continue to be), rather than from a smoker to become non-smoker
(2) growing of smoking population
(3) they dont just print cigarette packaging cartons or tobacco related products, they also print magazine, books, card ETC. This is important understanding.
(4) Tien Wah benefited from stenghtening of DOLLAR too!
I try to search from WHO website for some statistic, I found this guideline:
"Under a UN mandate to address four noncommunicable diseases (NCDs), the World Health Assembly established in 2013 a global voluntary tobacco target to help reduce prevent premature avoidable mortality from NCDs. The agreed global tobacco target is a 30% relative reduction in prevalence of current tobacco use in persons aged 15+ years."
http://apps.who.int/iris/bitstream/10665/156262/1/9789241564922_eng.pdf?ua=1
if you browsed to page 196 for Malaysia, you will find key message:
if you browse through page 350, you will see Vietnam (why vietnam? because in May 2015, Tien Wah signed an very important agreement with vietnam DOFICO which i strong believe it will bring big impact to Tien Wah's top and bottom line)
So i believe prospect remained intact, at least for the near future!
4th Question: BAT's contract till when?
In FY 2014 annual report, it did highlight that the contract to supply to BAT expired on 31 Oct 2016, which is extended from previous contract. And there is a extension clause. Based on Tien Wah background, i dont see any issue of further extension.
5th Question: What Next?
Remember Vietnam?
In May 2015, Tien Wah has entered into a joint venture agreement with Dong Nai Food Industrial corporation (DOFICO). This is a 50:50 joint Venture. And i believe DOFICO is state owned corporation. It is probably the biggest tabacco manufacturer in Vietnam with annual production capacity of 500 million packs of tobacco products.
I can't really find out more details about this DOFICO. But via their website, http://www.dofico.com.vn/Index.aspx i try to conclude that this is definetely not a small corporation and it has several hundred employees.
Prospecting The Future
1) Tien Wah has strong and healthy balance sheet with net cash position and NAPS of RM 2.90.
2) At current share price of RM 2.32, it is definetely worth a look.
3) In latest Q report, management did highlight of their effort to revaluate the service life of the machinery and thus lowered down the "depreciation" amount charged. Based on the reported "saving" of RM 3.2 million (3 quarters) / about RM 1.1 million per quarter saving will be added back into subsequent quarters for the next many years.
4) After the restructuring, the company has lowered down the overall cost and presented a very strong set of Q report. Further more, there is no more recurrent expensese from the restructuring.
5) At current TTM EPS of 23.81 sen, Tien Wah is traded at 9.7 times of PE which to me, is certainly fair.
6) If next 3 quarters Tien Wah able to maintain current performance, i think Tien Wah may go as high as RM 6.00 per share.
How I wish!
Best regards,
YiStock
14 Nov 2015
TIENWAH (7374) - The Awakening of 80th Years Old Giant - YiStock
http://klse.i3investor.com/blogs/TIENWAH/86119.jsp
